William Lazonick

Maximizing shareholder value: a new ideology for corporate governance

Over the past two decades the ideology of shareholder value has become entrenched as a principle of corporate governance among companies based in the United States and Britain. Over the past two or three years, the rhetoric of shareholder value has become prominent in the corporate governance debates in European nations such as Germany, France and Sweden. Within the past year, the arguments for ‘maximizing shareholder value’ have even achieved prominence in Japan. In 1999 the OECD issued a document, The OECD Principles of Corporate Governance, that emphasizes that corporations should be run, first and foremost, in the interests of shareholders (OECD, 1999)

Industrial Organization and Technological Change: The Decline of the British Cotton Industry

In this important study Professor Lazonick provides an astute reappraisal of why Britains once dominant economy has failed to meet the challenges of international competition in the twentieth century. The vehicle for his discussion is cotton manufacture, the industry which, through the technological and commercial innovations of the late eighteenth and early nineteenth centuries, made Britain the leading industrial power. Among Dr. Lazonicks questions are why did Britains preeminance in this industry come to an end? Why did technological innovation yield to stagnation? Why did inefficient modes of economic organization persist in the face of manifest inadequacy? And what does the history of this industry have to teach us about recent economic theory?

The organization of innovation in a transitional economy: business and government in Chinese electronic publishing

Abstract The national innovation system that emerged in China in the 1990s integrates government science and technology efforts, typically through the intermediation of public research institutes, with the business activities of industrial enterprises. In illustrating the institutional and organizational characteristics of this innovation system, the case study of Founder Group, world leader in pictographic-language electronic publishing systems, demonstrates both the strategic role of the state in the process of change and the increasing importance for economic success of the integration of investment strategy and organizational learning in industrial enteprises that compete for domestic and global markets.

Innovative Business Models and Varieties of Capitalism: Financialization of the U.S. Corporation

How does economic organization affect economic performance? This analysis of the historical transformation of the U.S. economy from the business model of the “old economy” to that of the “new economy” demonstrates that the Japanese challenge of the 1980s was an important catalyst for the shift. Anchored by the “Chandlerian” corporation, the old model delivered economic growth that was much more equitable and stable than the new one. Furthermore, the business model that underpinned the Japanese challenge represented a superior version of the old U.S. prototype. The fi nancialization of corporate decision-making under the new paradigm has been the prime source of inequity and instability in U.S. economic performance over the past three decades. As manifested in outsized executive pay and massive stock buybacks, the fi nancialization of the U.S. corporation threatens long-term economic growth.

Innovative Enterprise and Historical Transformation

The social conditions that affect innovation change over time and vary across productive activities. Hence theoretical analysis of the innovative enterprise must be integrated with historical study through the use of what I call a historical-transformation methodology-a methodology that stands in sharp contrast to, but can nonetheless be complemented by, the constrained-optimization methodology favored by conventional economists. In surveying some major attempts to analyze the role of the business enterprise in generating superior economic performance in the advanced economies, including the works of Oliver Williamson, Alfred Chandler, Edith Penrose, and resource-based theorists, I explain what a historical-transformation methodology is and why such a methodology is needed for understanding how and under what conditions business enterprises can in fact be innovative enterprises.

Internet and Digital Economics: Evolution of the new economy business model

This paper documents and analyzes the evolution of the “New Economy business model” (NEBM) over the past half century. Through the high-tech boom, bust, and recovery of the past decade, the NEBM has emerged as dominant in the U.S. information and communication technology industries, and elements of the NEBM have spread abroad. Strategy, finance, and organization are distinctive in the NEBM compared with the Old Economy business model (OEBM) that had evolved during the first half of the twentieth century. Strategically, the NEBM is highly focused on specific products and processes in contrast to horizontal diversification and vertical integration under the OEBM. Financially, under the NEBM, firms tend to pay no dividends, using all their retained earnings to fund growth. When they have grown large, however, NEBM firms engage in repeated large-scale stock repurchases so that they can better use their stock as a currency to acquire technology companies and, in the form of stock options, to compensate a broad base of employees. Organizationally, these employees tend to be highly educated, and routine production activities are automated and outsourced. The NEBM stresses the interfirm mobility of labor and the globalization of employment, with increasingly higher value-added activities being performed outside the United States. In historical perspective, the NEBM is the end of the “organization man.”

Production Relations, Labor Productivity, and Choice of Technique: British and U.S. Cotton Spinning

The role of capital-labor relations in the transformation of inputs into output is central to the Marxian theory of capitalist development but is neglected by neoclassical theory. By comparing the development of cotton spinning in Britain and the U.S. in the last half of the nineteenth century, this paper analyzes the ways in which capital-labor relations affected the level and structure of wages, labor productivity, and choice of technique. This case study demonstrates the descriptive and predictive limitations of the neoclassical theory of choice of technique while at the same time pointing the way towards the development of a more incisive, and historically relevant, theory.

Corporate governance and sustainable prosperity

How can we explain the persistent worsening of the income distribution in the United States in the 1980s and 1990s? What are the prospects for the re-emergence of sustainable prosperity in the US economy over the next generation? Situating these questions within a wider context through historical analysis and comparisons with Germany and Japan, this book focuses on the microeconomics of corporate investment behaviour, and the macroeconomics of household saving behaviour. Specifically, the contributors analyze how the combined pressures of excessive corporate growth, international competition, and intergenerational dependence have influenced corporate investment over the past two decades. They also offer a perspective on how corporate investment in skill bases can support sustainable prosperity, with studies drawn from the machine tool, aircraft engine, and medical equipment industries.

Karl Marx and Enclosures in England

Between about 1780 and 1830, an &dquo;industrial revolution&dquo; swept over England. In the process England emerged as the most economically advanced nation in the world, a position which it held for a good part of the 19th century. The question of why England was able to expand its productive capacities well in advance of other countries is of obvious interest to anyone who wants to understand the preconditions and mechanisms of economic development.

Competition, Specialization, and Industrial Decline

The technological backwardness of the British cotton industry in the first six decades of this century was due primarily to the structure of industrial organization, characterized by intense competition and specialization, that had developed in the nineteenth century when the industry had no serious international competitors. But with the rise of corporate economies, particularly in Japan and the United States, this structure of industrial organization rendered British cotton managers powerless to create the corporate structures required to meet this challenge. Britains decline was due to the failure of its managers to create conditions for new profitable opportunities by altering the constraints that they faced.